Accounting for Income Taxes Flashcards
What are the 2 differences between pretax GAAP financial income and taxable income?
Permanent differences and temporary differences
What does permanent differences affect?
Current tax computation
What does temporary differences affect?
Deferred tax computation
What method is required by GAAP for comprehensive allocation?
Asset and liability method(Balance Sheet Approach)
Total income tax expense or benefit for the year is the sum of?
Current income tax expense/benefit and deferred income tax/benefit
Current income tax is equal to?
Income taxes payable or refundable for the current year
Deferred income tax expense/benefit is equal to?
The change in deferred tax liability or asset account on the balance sheet from the beginning of the current year to the end of the current year
Deferred taxes are requred for what type of difference?
Temporary difference
What develops when taxable income comes later?
Future tax liability
What develops when taxable income comes first?
Prepaid tax benefit
What develops when tax deductions come later?
Future tax benefit
What develops when tax deductions come first?
Future tax liability
How can a deferred tax liability be distinguished?
Future tax accounting income > future financial accounting income
How can a deferred tax asset be distinguished?
Future tax accounting income < future financial accounting income
How does deferred tax assets arise?
Amounts of taxes paid in the current period exceeds the amount of income tax expense in the current period
